THIRD DIVISION

[G.R. No. 151212. September 10, 2003]

TEN FORTY REALTY AND DEVELOPMENT
CORP., Represented by its President,
VERONICA G. LORENZANA, petitioner,
vs. MARINA CRUZ, respondent.
D E C I S I O N
PANGANIBAN, J .:
In an ejectment suit, the question of ownership may be
provisionally ruled upon for the sole purpose of determining
who is entitled to possession de facto. In the present case,
both parties base their alleged right to possess on their right
to own. Hence, the Court of Appeals did not err in passing
upon the question of ownership to be able to decide who
was entitled to physical possession of the disputed land.
The Case
Before us is a Petition for Review[1] under Rule 45 of the
Rules of Court, seeking to nullify the August 31, 2001
Decision[2] and December 19, 2001 Resolution[3] of the Court
of Appeals (CA) in CA- GR SP No. 64861. The dispositive
portion of the assailed Decision is as follows:
WHEREFORE, premises considered, the petition is hereby
DISMISSED and the Decision dated May 4, 2001 is hereby
AFFIRMED.[4]
The assailed Resolution denied petitioner's Motion for
Reconsideration.
The Facts
The facts of the case are narrated by the CA as follows:
A complaint for ejectment was filed by [Petitioner Ten Forty
Realty and Development Corporation] against x x x [Respondent
Marina Cruz] before the Municipal Trial Court in Cities (MTCC)
of Olongapo City, docketed as Civil Case 4269, which alleged
that: petitioner is the true and absolute owner of a parcel of lot and
residential house situated in #71 18th Street, E.B.B. Olongapo
City, particularly described as:
A parcel of residential house and lot situated in the above-
mentioned address containing an area of 324 square meters more
or less bounded on the Northeast by 041 (Lot 255, Ts-308); on the
Southeast by 044 (Lot 255, Ts-308); on the Southwest by 043 (Lot
226-A & 18th street) and on the Northwest by 045 (Lot 227, Ts-
308) and declared for taxation purposes in the name of [petitioner]
under T.D. No. 002-4595-R and 002-4596.
having acquired the same on December 5, 1996 from Barbara
Galino by virtue of a Deed of Absolute Sale; the sale was
acknowledged by said Barbara Galino through a 'Katunayan';
payment of the capital gains tax for the transfer of the property was
evidenced by a Certification Authorizing Registration issued by the
Bureau of Internal Revenue; petitioner came to know that Barbara
Galino sold the same property on April 24, 1998 to Cruz, who
immediately occupied the property and which occupation was
merely tolerated by petitioner; on October 16, 1998, a complaint
for ejectment was filed with the Barangay East Bajac-Bajac,
Olongapo City but for failure to arrive at an amicable settlement, a
Certificate to File Action was issued; on April 12, 1999 a demand
letter was sent to [respondent] to vacate and pay reasonable
amount for the use and occupation of the same, but was ignored by
the latter; and due to the refusal of [respondent] to vacate the
premises, petitioner was constrained to secure the services of a
counsel for an agreed fee of P5,000.00 as attorneys fee and
P500.00 as appearance fee and incurred an expense of P5,000.00
for litigation.
In respondents Answer with Counterclaim, it was alleged that:
petitioner is not qualified to own the residential lot in dispute,
being a public land; according to Barbara Galino, she did not sell
her house and lot to petitioner but merely obtained a loan from
Veronica Lorenzana; the payment of the capital gains tax does not
necessarily show that the Deed of Absolute Sale was at that time
already in existence; the court has no jurisdiction over the subject
matter because the complaint was filed beyond the one (1) year
period after the alleged unlawful deprivation of possession; there is
no allegation that petitioner had been in prior possession of the
premises and the same was lost thru force, stealth or violence;
evidence will show that it was Barbara Galino who was in
possession at the time of the sale and vacated the property in favor
of respondent; never was there an occasion when petitioner
occupied a portion of the premises, before respondent occupied the
lot in April 1998, she caused the cancellation of the tax declaration
in the name of Barbara Galino and a new one issued in
respondents name; petitioner obtained its tax declaration over the
same property on November 3, 1998, seven (7) months [after] the
respondent [obtained hers]; at the time the house and lot [were]
bought by respondent, the house was not habitable, the power and
water connections were disconnected; being a public land,
respondent filed a miscellaneous sales application with the
Community Environment and Natural Resources Office in
Olongapo City; and the action for ejectment cannot succeed where
it appears that respondent had been in possession of the property
prior to the petitioner.[5]
In a Decision[6] dated October 30, 2000, the Municipal
Trial Court in Cities (MTCC) ordered respondent to vacate
the property and surrender to petitioner possession thereof.
It also directed her to pay, as damages for its continued
unlawful use, P500 a month from April 24, 1999 until the
property was vacated, P5,000 as attorneys fees, and the
costs of the suit.
On appeal, the Regional Trial Court[7] (RTC) of Olongapo
City (Branch 72) reversed the MTCC. The RTC ruled as
follows: 1) respondents entry into the property was not by
mere tolerance of petitioner, but by virtue of a Waiver and
Transfer of Possessory Rights and Deed of Sale in her favor;
2) the execution of the Deed of Sale without actual transfer
of the physical possession did not have the effect of making
petitioner the owner of the property, because there was no
delivery of the object of the sale as provided for in Article
1428 of the Civil Code; and 3) being a corporation, petitioner
was disqualified from acquiring the property, which was
public land.
Ruling of the Court of Appeals
Sustaining the RTC, the CA held that petitioner had
failed to make a case for unlawful detainer, because no
contract -- express or implied -- had been entered into by the
parties with regard to possession of the property. It ruled
that the action should have been for forcible entry, in which
prior physical possession was indispensable -- a
circumstance petitioner had not shown either.
The appellate court also held that petitioner had
challenged the RTCs ruling on the question of ownership for
the purpose of compensating for the latters failure to counter
such ruling. The RTC had held that, as a corporation,
petitioner had no right to acquire the property which was
alienable public land.
Hence, this Petition.[8]
Issues
Petitioner submits the following issues for our
consideration:
1. The Honorable Court of Appeals had clearly erred
in not holding that [r]espondents occupation or
possession of the property in question was merely
through the tolerance or permission of the herein
[p]etitioner;
[2.] The Honorable Court of Appeals had likewise erred
in holding that the ejectment case should have been
a forcible entry case where prior physical
possession is indispensable; and
[3.] The Honorable Court of Appeals had also erred
when it ruled that the herein [r]espondents
possession or occupation of the said property is in
the nature of an exercise of ownership which should
put the herein [p]etitioner on guard.[9]
The Courts Ruling
The Petition has no merit.
First Issue:
Alleged Occupation by Tolerance
Petitioner faults the CA for not holding that the former
merely tolerated respondents occupation of the subject
property. By raising this issue, petitioner is in effect asking
this Court to reassess factual findings. As a general rule,
this kind of reassessment cannot be done through a petition
for review on certiorari under Rule 45 of the Rules of Court,
because this Court is not a trier of facts; it reviews only
questions of law.[10] Petitioner has not given us ample
reasons to depart from the general rule.
On the basis of the facts found by the CA and the RTC,
we find that petitioner failed to substantiate its case for
unlawful detainer. Admittedly, no express contract existed
between the parties. Not shown either was the corporations
alleged tolerance of respondents possession.
While possession by tolerance may initially be lawful, it
ceases to be so upon the owners demand that the
possessor by tolerance vacate the property.[11] To justify an
action for unlawful detainer, the permission or tolerance
must have been present at the beginning of the
possession.[12] Otherwise, if the possession was unlawful
from the start, an action for unlawful detainer would be an
improper remedy. Sarona v. Villegas[13] elucidates thus:
A close assessment of the law and the concept of the word
tolerance confirms our view heretofore expressed that such
tolerance must be present right from the start of possession sought
to be recovered, to categorize a cause of action as one of unlawful
detainer not of forcible entry. Indeed, to hold otherwise would
espouse a dangerous doctrine. And for two reasons. First.
Forcible entry into the land is an open challenge to the right of the
possessor. Violation of that right authorizes the speedy redress
in the inferior court provided for in the rules. If one year from
the forcible entry is allowed to lapse before suit is filed, then the
remedy ceases to be speedy; and the possessor is deemed to have
waived his right to seek relief in the inferior court. Second, if a
forcible entry action in the inferior court is allowed after the lapse
of a number of years, then the result may well be that no action for
forcible entry can really prescribe. No matter how long such
defendant is in physical possession, plaintiff will merely make a
demand, bring suit in the inferior court upon a plea of tolerance
to prevent prescription to set in and summarily throw him out of
the land. Such a conclusion is unreasonable. Especially if we bear
in mind the postulates that proceedings of forcible entry and
unlawful detainer are summary in nature, and that the one year
time bar to suit is but in pursuance of the summary nature of the
action.[14]
In this case, the Complaint and the other pleadings do
not recite any averment of fact that would substantiate the
claim of petitioner that it permitted or tolerated the
occupation of the property by Respondent Cruz. The
Complaint contains only bare allegations that 1) respondent
immediately occupied the subject property after its sale to
her, an action merely tolerated by petitioner;[15] and 2) her
allegedly illegal occupation of the premises was by mere
tolerance.[16]
These allegations contradict, rather than support,
petitioners theory that its cause of action is for unlawful
detainer. First, these arguments advance the view that
respondents occupation of the property was unlawful at its
inception. Second, they counter the essential requirement in
unlawful detainer cases that petitioners supposed act of
sufferance or tolerance must be present right from the start
of a possession that is later sought to be recovered.[17]
As the bare allegation of petitioners tolerance of
respondents occupation of the premises has not been
proven, the possession should be deemed illegal from the
beginning. Thus, the CA correctly ruled that the ejectment
case should have been for forcible entry -- an action that had
already prescribed, however, when the Complaint was filed
on May 12, 1999. The prescriptive period of one year for
forcible entry cases is reckoned from the date of
respondents actual entry into the land, which in this case
was on April 24, 1998.
Second Issue:
Nature of the Case
Much of the difficulty in the present controversy stems
from the legal characterization of the ejectment Complaint
filed by petitioner. Specifically, was it for unlawful detainer or
for forcible entry?
The answer is given in Section 1 of Rule 70 of the Rules
of Court, which we reproduce as follows:
SECTION 1. Who may institute proceedings, and when. - Subject
to the provisions of the next succeeding section, a person deprived
of the possession of any land or building by force, intimidation,
threat, strategy, or stealth, or a lessor, vendor, vendee, or other
person against whom the possession of any land or building is
unlawfully withheld after the expiration or termination of the right
to hold possession, by virtue of any contract, express or implied, or
the legal representatives or assigns of any such lessor, vendor,
vendee, or other person, may, at any time within one (1) year after
such unlawful deprivation or withholding of possession, bring an
action in the proper Municipal Trial Court against the person or
persons unlawfully withholding or depriving of possession, or any
person or persons claiming under them, for the restitution of such
possession, together with damages and costs.
While both causes of action deal only with the sole issue
of physical or de facto possession,[18] the two cases are
really separate and distinct, as explained below:
x x x. In forcible entry, one is deprived of physical possession of
land or building by means of force, intimidation, threat, strategy, or
stealth. In unlawful detainer, one unlawfully withholds possession
thereof after the expiration or termination of his right to hold
possession under any contract, express or implied. In forcible
entry, the possession is illegal from the beginning and the basic
inquiry centers on who has the prior possession de facto. In
unlawful detainer, the possession was originally lawful but became
unlawful by the expiration or termination of the right to possess,
hence the issue of rightful possession is decisive for, in such
action, the defendant is in actual possession and the plaintiffs
cause of action is the termination of the defendants right to
continue in possession.
What determines the cause of action is the nature of defendants
entry into the land. If the entry is illegal, then the action which
may be filed against the intruder within one year therefrom is
forcible entry. If, on the other hand, the entry is legal but the
possession thereafter became illegal, the case is one of unlawful
detainer which must be filed within one year from the date of the
last demand.[19]
It is axiomatic that what determines the nature of an
action as well as which court has jurisdiction over it are the
allegations in the complaint[20] and the character of the relief
sought.[21]
In its Complaint, petitioner alleged that, having acquired
the subject property from Barbara Galino on December 5,
1996,[22] it was the true and absolute owner[23] thereof; that
Galino had sold the property to Respondent Cruz on April
24, 1998;[24] that after the sale, the latter immediately
occupied the property, an action that was merely tolerated by
petitioner;[25] and that, in a letter given to respondent on April
12, 1999,[26] petitioner had demanded that the former vacate
the property, but that she refused to do so.[27] Petitioner
thereupon prayed for judgment ordering her to vacate the
property and to pay reasonable rentals for the use of the
premises, attorneys fees and the costs of the suit.[28]
The above allegations appeared to show the elements of
unlawful detainer. They also conferred initiatory jurisdiction
on the MTCC, because the case was filed a month after the
last demand to vacate -- hence, within the one-year
prescriptive period.
However, what was actually proven by petitioner was
that possession by respondent had been illegal from the
beginning. While the Complaint was crafted to be an
unlawful detainer suit, petitioners real cause of action was
for forcible entry, which had already prescribed.
Consequently, the MTCC had no more jurisdiction over the
action.
The appellate court, therefore, did not err when it ruled
that petitioners Complaint for unlawful detainer was a mere
subterfuge or a disguised substitute action for forcible entry,
which had already prescribed. To repeat, to maintain a
viable action for forcible entry, plaintiff must have been in
prior physical possession of the property; this is an essential
element of the suit.[29]
Third Issue:
Alleged Acts of Ownership
Petitioner next questions the CAs pronouncement that
respondents occupation of the property was an exercise of a
right flowing from a claim of ownership. It submits that the
appellate court should not have passed upon the issue of
ownership, because the only question for resolution in an
ejectment suit is that of possession de facto.
Clearly, each of the parties claimed the right to possess
the disputed property because of alleged ownership of it.
Hence, no error could have been imputed to the appellate
court when it passed upon the issue of ownership only for
the purpose of resolving the issue of possession de facto.[30]
The CAs holding is moreover in accord with jurisprudence
and the law.
Execution of a Deed of Sale
Not Sufficient as Delivery
In a contract of sale, the buyer acquires the thing sold
only upon its delivery in any of the ways specified in Articles
1497 to 1501, or in any other manner signifying an
agreement that the possession is transferred from the
vendor to the vendee.[31] With respect to incorporeal
property, Article 1498 lays down the general rule: the
execution of a public instrument shall be equivalent to the
delivery of the thing that is the object of the contract if, from
the deed, the contrary does not appear or cannot be clearly
inferred.
However, ownership is transferred not by contract but by
tradition or delivery.[32] Nowhere in the Civil Code is it
provided that the execution of a Deed of Sale is a conclusive
presumption of delivery of possession of a piece of real
estate.[33]
This Court has held that the execution of a public
instrument gives rise only to a prima facie presumption of
delivery. Such presumption is destroyed when the delivery is
not effected because of a legal impediment.[34] Pasagui v.
Villablanca[35] had earlier ruled that such constructive or
symbolic delivery, being merely presumptive, was deemed
negated by the failure of the vendee to take actual
possession of the land sold.
It is undisputed that petitioner did not occupy the
property from the time it was allegedly sold to it on
December 5, 1996 or at any time thereafter. Nonetheless, it
maintains that Galinos continued stay in the premises from
the time of the sale up to the time respondents occupation of
the same on April 24, 1998, was possession held on its
behalf and had the effect of delivery under the law.[36]
Both the RTC and the CA disagreed. According to the
RTC, petitioner did not gain control and possession of the
property, because Galino had continued to exercise
ownership rights over the realty. That is, she had remained
in possession, continued to declare it as her property for tax
purposes and sold it to respondent in 1998.
For its part, the CA found it highly unbelievable that
petitioner -- which claims to be the owner of the disputed
property -- would tolerate possession of the property by
respondent from April 24, 1998 up to October 16, 1998.
How could it have been so tolerant despite its knowledge
that the property had been sold to her, and that it was by
virtue of that sale that she had undertaken major repairs and
improvements on it?
Petitioner should have likewise been put on guard by
respondents declaration of the property for tax purposes on
April 23, 1998,[37] as annotated in the tax certificate filed
seven months later.[38] Verily, the tax declaration
represented an adverse claim over the unregistered property
and was inimical to the right of petitioner.
Indeed, the above circumstances derogated its claim of
control and possession of the property.
Order of Preference in Double
Sale of Immovable Property
The ownership of immovable property sold to two
different buyers at different times is governed by Article 1544
of the Civil Code, which reads as follows:
Article 1544. x x x
Should it be immovable property, the ownership shall belong to
the person acquiring it who in good faith first recorded it in the
Registry of Property.
Should there be no inscription, the ownership shall pertain to the
person who in good faith was first in possession; and, in the
absence thereof, to the person who presents the oldest title,
provided there is good faith.
Galino allegedly sold the property in question to
petitioner on December 5, 1996 and, subsequently, to
respondent on April 24, 1998. Petitioner thus argues that
being the first buyer, it has a better right to own the realty.
However, it has not been able to establish that its Deed of
Sale was recorded in the Registry of Deeds of Olongapo
City.[39] Its claim of an unattested and unverified notation on
its Deed of Absolute Sale[40] is not equivalent to registration.
It admits that, indeed, the sale has not been recorded in the
Registry of Deeds.[41]
In the absence of the required inscription, the law gives
preferential right to the buyer who in good faith is first in
possession. In determining the question of who is first in
possession, certain basic parameters have been established
by jurisprudence.
First, the possession mentioned in Article 1544 includes
not only material but also symbolic possession.[42] Second,
possessors in good faith are those who are not aware of any
flaw in their title or mode of acquisition.[43] Third, buyers of
real property that is in the possession of persons other than
the seller must be wary -- they must investigate the rights of
the possessors.[44] Fourth, good faith is always presumed;
upon those who allege bad faith on the part of the
possessors rests the burden of proof.[45]
Earlier, we ruled that the subject property had not been
delivered to petitioner; hence, it did not acquire possession
either materially or symbolically. As between the two buyers,
therefore, respondent was first in actual possession of the
property.
Petitioner has not proven that respondent was aware
that her mode of acquiring the property was defective at the
time she acquired it from Galino. At the time, the property --
which was public land -- had not been registered in the name
of Galino; thus, respondent relied on the tax declarations
thereon. As shown, the formers name appeared on the tax
declarations for the property until its sale to the latter in
1998. Galino was in fact occupying the realty when
respondent took over possession. Thus, there was no
circumstance that could have placed the latter upon inquiry
or required her to further investigate petitioners right of
ownership.
Disqualification from Ownership
of Alienable Public Land
Private corporations are disqualified from acquiring lands
of the public domain, as provided under Section 3 of Article
XII of the Constitution, which we quote:
Sec. 3. Lands of the public domain are classified into agricultural,
forest or timber, mineral lands, and national parks. Agricultural
lands of the public domain may be further classified by law
according to the uses to which they may be devoted. Alienable
lands of the public domain shall be limited to agricultural lands.
Private corporations or associations may not hold such alienable
lands of the public domain except by lease, for a period not
exceeding twenty-five years, and not to exceed one thousand
hectares in area. Citizens of the Philippines may not lease not
more than five hundred hectares, or acquire not more than twelve
hectares thereof by purchase, homestead, or grant. x x x. (Italics
supplied)
While corporations cannot acquire land of the public
domain, they can however acquire private land.[46] Hence,
the next issue that needs to be resolved is the determination
of whether the disputed property is private land or of the
public domain.
According to the certification by the City Planning and
Development Office of Olongapo City, the contested property
in this case is alienable and disposable public land.[47] It was
for this reason that respondent filed a miscellaneous sales
application to acquire it.[48]
On the other hand, petitioner has not presented proof
that, at the time it purchased the property from Galino, the
property had ceased to be of the public domain and was
already private land. The established rule is that alienable
and disposable land of the public domain held and occupied
by a possessor -- personally or through predecessors-in-
interest, openly, continuously, and exclusively for 30 years --
is ipso jure converted to private property by the mere lapse
of time.[49]
In view of the foregoing, we affirm the appellate courts
ruling that respondent is entitled to possession de facto.
This determination, however, is only provisional in nature.[50]
Well-settled is the rule that an award of possession de facto
over a piece of property does not constitute res judicata as
to the issue of its ownership.[51]
WHEREFORE, this Petition is DENIED and the assailed
Decision AFFIRMED. Costs against petitioner.
SO ORDERED.
Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ.,
concur.
Puno, (Chairman), on official leave.